The Financial Impact Of The Meaningful Use Stage 2 Extension

The decision by the U.S. Department of Health and Human Services to push back by one year the deadline for compliance with meaningful use stage 2 is good news for hospitals and physician practices. Many providers have had trouble marshalling adequate financial resources toward meeting even the stage 1 deadline on implementation of electronic health records.

It has been slow going even for large hospital systems such as Catholic Health Initiatives (CHI), which established a $2.2 billion OneCare capital budget in 2011. Those funds go, in part, to reaching stage 1 meaningful use compliance by the July 1, 2014 deadline. About 20 of CHI’s 87 hospitals will not make that deadline, incurring millions of dollars in penalties.

About 15 of the company’s 87 hospitals will be entering stage 2 in 2014, which began, for hospitals, on Oct. 1, 2013. The start date for physician practices is January 1, 2014. Hospitals initially had two years to complete stage 2. But in December, HHS officials announced a one-year extension to October 2016.

“The extension of the stage 2 deadline for us is great,” said Ann D. Shepard, RN-BC, MSN, Vice President and Chief Nursing Informatics Officer at CHI. Shepard pointed out that the extra breathing room is doubly important because CHI hospitals and every other hospital in the country has to switch over to the ICD-10 coding system by October 1, 2014. Hospitals may now be able to reallocate stage 2 “dollars” to ICD-10 efforts. The American Hospital Association told the Senate Finance Committee last July that a survey it completed found that the vast majority of hospitals are on track for the transition to ICD-10, but see meaningful use as the single most challenging competing priority.

But, said Russell Branzell, CEO of the College of Healthcare Information Management Executives, “We still believe there’s going to be a pressure point in 2014 for ICD-10 and Stage 2.”

Given the extra year to certify all its hospitals to stage 2, Shepard stated that none of CHI’s hospitals expect to be penalized for failing to meet stage 2 meaningful use standards in 2016. Most health systems hope they’ll be able to say the same thing.